Microsoft empire may face a threat from AOL-Netscape Planned pairing might affect antitrust trial

OUTLOOK

Outlook

December 20, 1998|By Mark Ribbing

AMERICA ONLINE Inc.'s pending acquisition of Netscape Communications Corp. would bring together two of the world's best-known Internet companies. Software giant Microsoft Corp. says the merger undercuts the federal government's claim that Microsoft has stifled competition in the high-tech sector. Last week, the judge in the case, Thomas Penfield Jackson, said the AOL-Netscape deal "might be a very significant change of the playing field."

How will the merger affect the Microsoft litigation?

Do AOL and Netscape, along with partner Sun Microsystems Inc., pose a genuine competitive threat to Bill Gates' empire?

Stephen M. Axinn

Antitrust attorney and partner at Axinn, Veltrop & Harkrider LLP, New York

I think the government's case against Microsoft is a case which is based almost entirely on Microsoft's conduct and whether that conduct does or does not exclude competitors from the browser marketplace and some other marketplaces.

If that is proven, then liability will be established and the AOL-Netscape deal won't have any impact on whether the conduct of Microsoft was unreasonably exclusionary.

The nation, the government and the court might be given a boost by the deal because it -- more than any remedy that the government might endorse -- offers the promise of increasing competition and undoing the effects of any exclusionary conduct that Microsoft might have engaged in.

One should not take the next step and say because these three guys are putting together a new venture that means the suit ought to be dropped.

The purpose of the government's suit is not just to stop Microsoft but to send messages as to what the white lines are on this ball field.

We all are watching intensely to see what the court ultimately does do here because we've all got clients like Microsoft who'd like to do what Microsoft does but are afraid to do it.

John Robb

Director of Gomez Advisors Inc., an Internet consulting firm based in Boston

It probably will [affect the Microsoft case], primarily because Microsoft is going to make the case they are in direct competition with AOL and is behind AOL. AOL's at 14.5 million desktops without even counting the Net- scape browsers. You add the Netscape browsers to that, you're at anywhere between 20 to 25 million customers for Netscape alone. That's a pretty heavy-duty competitor and it comes out of a space where Microsoft hasn't done well historically.

Judge Jackson's going to look at this and say that in corporate space in particular, Microsoft has a weighty competitor and that's going to affect the case.

Andrew Brosseau

Technology analyst at SG Cowen Securities Corp. in Boston

On one hand, that acquisition has nothing to do with the activities that Microsoft has done over the last several years that have been the focus of the investigation. On the other hand it goes to the question of what the purpose of antitrust litigation ought to be and whether Microsoft is in a monopoly position that will be extended into the next century or not.

The combination goes to the heart of where Microsoft wants to go. If you think of Microsoft now, 70 to 75 percent of its revenue comes from traditional desktop operating systems and applications.

But where its growth will come is in two areas.

The first is enterprise software that supports multi-user applications within a system. The second is Internet content and services. What the AOL-Netscape-Sun triumvirate will be addressing is those two latter areas.

Pub Date: 12/20/98

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